“Inventory” is an industrial age term

Inventory management is an industrial age conceptAnd we need something better.

In introducing the concept of Local Ad Networks to media companies — where we place ads on as many sites in the marketplace that will have us — I’m often met with the following response: “Why would I want to increase the number of sites I’m advertising on when I can’t even sell the inventory I’ve got on my own site?” It’s a logical question given the world we’ve created been handed. The answer is simple, but understanding it means thinking outside the conventional realm of reach-frequency in a display advertising model.

Implied in the question are at least seven assumptions, so let’s examine them one at a time.

  1. The CPM method of selling and accounting is the best way to handle online advertising. The reality is more that CPM is what we have, and that’s just the way it is and has to be. This is a compromise and one that values advertisers over publishers, especially when rates are established by third-party networks. CPM pricing is killing online publishing, but CPM accounting is arguably a good way to keep track of payments and trafficking. It does not necessarily follow, however, that this is the way we should sell advertising on the front end. Simply put, the industry is so accustomed to CPM pricing that the only way for us to increase the value of our content would be to dramatically increase the CPM. That’s just not going to work, and that’s a problem that we’ve created for ourselves.

    Moreover — and this, frankly, is most important — there’s no compensation for the data that’s acquired by the server handling the ads, which, to the server, is of greater value that the reach provided by serving the ads in the first place. Data is our future, and we’re giving it away by serving only or mostly third-party ads.

  2. CPM is lazy but it’s what we know. We sit back and take orders from advertisers and networks that want our inventory rather than fight for the value of what we create.

  3. All ad impressions are created equal. This bogus assumption has been used by the advertising industry to commodify online advertising in such a way that it has destroyed the value of the content around which these ads are served. In order to create a viable accounting mechanism for BIG advertisers, this one-sided proposition serves only advertisers and the networks that serve them. Publishers don’t stand a chance, and this became acutely apparent when the economy went south two years ago.

    The tail wags the dog for publishers, and we simply must find a way to break free, or local media properties will ultimately be worth a tiny fraction of what we used to know.

    The reality is that all ad impressions are not created equal, and the amazing thing to me is that we already know this is true, or why else would certain ad positions cost more than others. We continue, however, to perpetuate the myth that the ad industry needs to maintain its catbird position.

  4. Eyeballs are eyeballs, and inventory is inventory. Flowing from above assumption, this one is also needed to cement the necessity of easily assembling a mass for the CPM model. We’re content with the knowledge that, over a certain period of time, we’ll accumulate enough eyeballs that our advertisers will surely be able to hit their targets. This is old mass market thinking, for while we’re doing that, third-party ad networks are accumulating data, so that they don’t need mass eyeballs to deliver targets anymore.
  5. Cumulative reach is the same as real time reach. This is perhaps the most dangerous assumption we make in cultivating the CPM model, for as the news and information business shifts to real time, so, too, does advertising. The ability of an advertiser to immediately switch out ad copy is already a high value proposition for companies offering these types of ads, but there’s no place for it when all you’re doing is counting eyeballs over a period of time.

    The shift to real time is one of the clearest online trends of contemporary media, and we must find ways to work with the trend instead of fooling ourselves into believing that the old accumulation of mass over time will protect us. It won’t.

  6. Banner blindness isn’t a real problem. The notion that people don’t “see” the ads on media company websites has been proven by the eye-tracking studies of Jakob Nielsen, and yet we must set it aside to validate the CPM model. After all, if it was true, then the myth would be destroyed, and we can’t let that happen.

    Even companies who accept the idea of banner blindness fight it by turning plain banners into whirling, blinking “rich media” ads that fight for attention. All they do is piss people off. And how about those ads that do manage to pop up? It’s amazing how easy it is to find the “X” to close the ad without ever actually looking at it.

  7. The value of online advertising is determined by the advertiser, not the publisher. We’re getting exactly what we deserve by buying into the myths and assumptions of mass advertising online. We’ve dug ourselves into this hole, and as the old saying goes, the first thing we have to do in order to get out is to stop digging.” In order to “fix” this, however, we need an entirely new way of looking at the real value of online ads, and that won’t be found by affixing ourselves to the concept of “inventory.”
  8. Local advertisers are happy with the CPM model. As Gordon Borrell says, “Local advertising is sold, not bought,” so we automatically run into problems with the model locally, because advertisers who don’t or can’t “see” their ads don’t come away with a real warm feeling. The bigger the portal website we operate, the greater the problem, for ad visibility becomes a serious matter to the local guy whose shelling out money to “see” his own ads. If he can’t see them, he assumes nobody is seeing them, regardless of the report we can print from server logs that shows otherwise.

    When your site garners 10 million page views a month, a campaign providing even a half a million impressions doesn’t stand a chance of being seen by anything other than the server. Local advertisers want visibility, not to get lost in a vast sea of our greatness.

So inventory isn’t the issue that we think it is, and it’s certainly the wrong question in dealing with a concept like the Local Ad Network. Inventory is an industrial age term that finds meaning in a world of mass. Data, however, is our future, and that turns the world of inventory on its head.

Of all the issues listed above, none is greater than the shift to real time. This is much more problematic for the print industry than their broadcast competitors, for broadcasters know and understand real time audience reporting. We call it “ratings,” the percentage of households capable of viewing who are actually doing so.

So the accumulation of large numbers of sites in a market upon which we can serve ads is both a reach and data play. The reach, however, is both horizontal and vertical, and that stands a much better chance for future relevancy than “inventory” spread out over a single website.

(Originally posted in AR&D’s Media 2.0 Intel newsletter)

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